Happy graduation, tigers!

By
HR /
February 4, 1988

THE Reagan administration's move to ``graduate'' Taiwan, South Korea, Singapore, and Hong Kong from a program of special trade preferences makes sense. These ``four tigers'' of Asia have been on everyone's list of ``developing'' countries that really are now ``developed,'' at least in terms of their success in selling in the American marketplace, if not their per capita income.

The trade surpluses they have been running with the United States have made it hard to believe they need special help. The four tigers accounted for 22 percent of the US trade deficit for the first 11 months of 1987, more than any other country or bloc save Japan. Dropping them from the so-called Generalized System of Preferences (GSP) should not be seen as a move toward protectionism. Rather, it should help diffuse whatever protectionist sentiment exists in Congress and other US arenas. The move also gives a signal to other developing countries that they, too, can expect to be shut out of GSP, which includes 130-plus developing countries, if their trade surpluses with the US become excessive.

The US has taken issue with the four tigers over their exchange rates and what it sees as an unwillingness - on the part of South Korea and Taiwan, at least - to open their doors to American goods. Although these two nations have let their currencies appreciate, it still hasn't been enough to affect their US trade balance much. Hong Kong, meanwhile, has let US goods in, but clings to fixed exchange rates - pegged to the US dollar - on the grounds that as a financial center with an uncertain political future, it needs the stability such rates afford.

The new tariffs to which the tigers' goods will now be subject will not amount to much, and trade flows are not expected to be much affected. But ``graduating'' the four from GSP is a useful signal - and should be seen, ultimately, as a sign of progress by the countries themselves.